Roper Industries Diversified, Ready for Recovery

Roper Industries (ROP) is seen by analysts as a diversified company that is ready to grow with recovery in the global economy. It sells across a variety of industries and into multiple sectors, so the risk of a slowdown in a given part of the economy is lessened. Nevertheless, declining demand would slow progress, and most analysts remain neutral at recent price levels.

Roper markets these products and services to selected segments of a broad range of markets, including RF applications, medical, water, energy, research, education, software-as-a-service based information networks, security and other niche markets. Roper sells globally, exporting from the United States and manufacturing abroad

“We maintain a leading position in many of our markets. We believe our market positions are attributable to the technical sophistication of our products, the applications expertise used to create our advanced products and systems, and our distribution and service capabilities,” Roper management said in a recent filing.

Roper Industries has a market cap of $10.16 billion in a sector, electrical equipment, where the average company size is $2.47 billion. Its trailing 12-month P/E ratio is 22.63 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.62, compared to 0.58 for the sector.

Its projected earnings per share growth for the coming year is 16.63 percent, compared to a sector average of 16.56 percent.

Cash flow

Analysts are positive on ROP, with buy or outperform calls from Lehman Brothers and Jefferson Research.

“We view ROP's asset-light business model, which we believe leads to above average operating margins and cash flow generation, favorably and see the company benefiting from a gradually improving economy,” Standard & Poor’s analysts wrote on Aug. 7.

“In addition, we think ROP is has positioned itself in markets with above-average secular growth potential, where it has competitive advantages through development of proprietary products and customer-centric services. Balancing the slowdown in organic revenue growth against the likely completion of its Sunquest acquisition, we think the shares are appropriately valued.”